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DALLAS (AP) — Rising fuel costs are eating into airline profits, dampening expectations for the rest of 2018, and setting the stage for higher fares.

Fuel is the airlines' second-biggest expense after labor, so when it rises — at American it was up 40 cents a gallon from a year ago — so does the cost of providing air travel, says American Airlines CEO Doug Parker.

"If indeed this is where fuel prices are going to stay, I would expect you would see higher fares to consumers over time," Parker said Thursday on a call with analysts and reporters.

American blamed higher fuel prices for a 45% drop in first-quarter profit, to $186 million.

American has replaced many of its gas-guzzling older planes with new, more efficient jets over the last several years. Still, fuel spending jumped 26%.

An American Eagle Embraer E170 jet passes in front of the iconic Hollywood sign while on final approach to Los Angeles International Airport on Nov. 8, 2015. Jeremy Dwyer-Lindgren, Special for USA TODAY

The skyline of New York. American counts its operations operations at JFK and LaGuardia airports as a combined hub, though the airports are separated by a considerable cab ride during normal traffic conditions.LaGuardia was American's eighth-busiest hub (by passengers) in 2015. JFK was ninth. Mark Lennihan, AP

The airline burned just over 1 billion gallons in the first quarter, and it paid an average of $2.10 a gallon, up from $1.70 a year earlier. American estimated that it would have saved $412 million — more than offsetting the profit slump — if fuel were still at early-2017 levels.

Fuel prices have crept up even since the first quarter ended March 31. Airlines typically raise fares when fuel gets costlier, although they are not always able to fully recover the higher pump prices.

Parker said he doesn't think fares will rise fast enough to have much effect on demand for travel, which has been strong. Passenger revenue per mile, which roughly tracks fares and fees, rose 3% over the same period last year.

The Fort Worth, Texas-based company said earnings fell from $340 million a year earlier.

Excluding non-repeating items, American Airlines Group said it would have earned 75 cents per share. That was a penny better than forecast by nine analysts surveyed by Zacks Investment Research.

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American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

A handheld, tethered remote pulls out from the side wall of American Airlines' new premium economy seat, seen here on a flight to Dallas/Fort Worth Texas on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new Boeing 787-9 Dreamliner, seen at the gate in Los Angeles on Oct. 14, 2016. The plane is the first to fly with American's new international-style premium economy seats. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

A gray, gloomy Los Angeles bids farewell to an American Airlines Boeing 787-9 on Oct. 14, 2016. The plane is the first to fly with American's new international-style premium economy seats. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

American Airlines' new premium economy cabin is seen on one of the airline's new Boeing 787-9 Dreamliner on the ground at Dallas/Fort Worth on Oct. 14, 2016. Jeremy Dwyer-Lindgren, special for USA TODAY

An American Airlines Boeing 787-9 prepares for landing into Dallas/Fort Worth airport on Oct. 14, 2016. The plane is the first to fly with American's new international-style premium economy seats. Jeremy Dwyer-Lindgren, special for USA TODAY